Interest rates are fluctuating and inventory is up.
THE DEAL WITH INTEREST RATES
On the afternoon of September 18th, 2024 the Fed announced the long-anticipated federal funds rate cut. This is the first cut since the pandemic that lowered the rate by a half point rather than the usual .25% cut, putting the federal funds rate between 4.75 and 5 percent. During the press conference, Federal Reserve Chair Jerome Powell stated, “The labor market is actually in solid condition — and our intention with our policy move today is to keep it there.” (AXIOS)
THE INFAMOUS BUILDUP
Since 2022, the Federal Reserve has steadily increased the federal funds rates in response to rising inflation and economic pressures. Starting from near-zero levels, the Fed implemented a series of aggressive rate hikes to curb inflation, which had surged to levels not seen in decades.
The federal funds rate increases, which began in March 2022, were part of the central bank’s effort to tighten monetary policy after years of stimulus following the COVID-19 pandemic. By mid-2023, the federal funds rate had climbed to a range of 5.25%–5.5%, marking one of the most rapid tightening cycles in recent history.
These rate hikes were aimed at cooling the overheated economy, particularly in sectors such as housing and labor, to bring inflation closer to the Fed’s target of 2%. The sustained increase in borrowing costs has had significant effects across markets, impacting consumer spending, mortgage rates, and business investments.
THE ANTICIPATED PRESENT
On September 18th, 2024, the Federal Reserve implemented a much-anticipated federal funds rate cut, lowering the federal funds rate to a target range of 4.75%–5%, down from the previous range of 5.25%–5.5% set in July.
This marked the first rate reduction since the Fed began its series of aggressive hikes in 2022 to combat inflation. The decision to cut rates reflected the Fed’s assessment that inflation had eased and the economy had cooled, particularly in job growth, allowing for a more accommodative monetary policy. The central bank also signaled additional cuts by the end of the year, anticipating a quarter-point reduction at each of its remaining meetings.
Fed officials expressed greater confidence that inflation was moving toward the 2% target, with projections suggesting further gradual rate decreases through 2025. This move indicated a shift toward balancing growth and price stability after a prolonged period of tightening.
WHAT DOES THE FEDERAL FUNDS RATE DROP MEAN FOR BUYERS & SELLERS IN AUSTIN, TEXAS?
IF YOU’RE BUYING HERE’S WHAT YOU NEED TO KNOW
For buyers, the market remains competitive, though there are signs of slightly more negotiating power than in 2023. Many areas are experiencing fewer multiple offers, and many properties have seen price reductions. First-time homebuyers, however, continue to face challenges due to higher interest rates and higher-than-average home prices.
IF YOU ARE SELLING HERE’S WHAT YOU NEED TO KNOW
For sellers, the landscape remains largely favorable but more nuanced compared to the hyper-competitive market of recent years. While home values are still rising in price, the pace has slowed, and sellers are finding that pricing their homes too aggressively will lead to extended time on the market. Properties in desirable locations and in move-in-ready condition continue to attract strong interest, but buyers are becoming more discerning and less willing to engage in multiple-offer situations. Sellers with well-maintained homes in popular areas like Tarrytown or Hyde Park are still commanding premium prices, but overall, the need for strategic pricing and attractive listings is becoming more evident.
WHERE RATES ARE HEADED NEXT
The central bank released new projections indicating an expected further Federal Funds Rate reduction of half a percentage point by December, suggesting quarter-point cuts at both of its remaining 2024 meetings.
By the end of 2025, the median projection from Fed officials places the target rate at 3.4%, signaling four quarter-point cuts next year. The Fed’s policy statement noted the committee’s “greater confidence that inflation is moving sustainably toward 2 percent.”
OCTOBER COFFEE CHAT WITH DAVID BRODSKY
Owning a home isn’t just about having a place to live—it’s about building a foundation for your future. See what else David has to say:
